Group Health Insurance

Group Health Insurance: A primer

Written by Nancy Sinatra

Group health insurance is health coverage offered through an employer or union to a group of people. Like all insurance plans, group health insurance plans spread the cost of medical care among the members of the group, or the broader pool of insureds covered by the insurer. Group health insurance plans usually cost less than individual insurance plans because employers kick in some of the cost, and because insurers give better rates when selling policies for large groups of people. The majority of people under the age of 65 who have health insurance are generally enrolled in group health insurance plans. In fact, a recent survey found that about 80 percent of working adults with private health insurance, that is insurance not provided through the government, obtain health insurance coverage through their employers. Overall, 60 percent of all Americans are covered by employer-provided group health insurance plans. While a large number of people have health insurance through their employers, there is a substantial number of Americans who have no health insurance coverage at all. This number is often distorted in the context of political debate, as health care has become an extremely contentious issue in recent years, but most estimates place the number of uninsured Americans at between 10 and 40 million. Rising costs Nearly all major companies in the United States offer some form of group health insurance coverage to their employees, and in fact, the typical employer-based health insurance plan offers more generous benefits than Medicare. Employers kick in a large share of the cost of health care coverage. According to a recent study, employees usually only kick in about 16 to 27 percent of the cost of coverage. Employees also benefit in that the money their employers kick in for health coverage is currently not taxed by state or federal governments, providing a substantial advantage to employees. The overall cost of health coverage has been going up for employees and employers since the 1960s and has escalated sharply in recent years. The average total cost of health plans in 2008 was $4,700 for single employees and about $12,000 for employers. Because of the rising costs, and because of an overall trend of wage stagnation, the number of employees taking advantage of their employers health plans has been steadily declining in recent years. Many group health plans work to keep a lid on costs by participating in provider networks, which require insureds to obtain services from a list of health care providers who have contracted with the insurer to provide services at a discounted rate. Insureds who seek care outside the network may be reimbursed for care at a reduced rate, or not at all. Rising health care costs, and their overall impact on the economy as employers have had to raise prices, make cutbacks or take less profit to keep up with these costs, has become a major cause for concern with regard to public policy. Lawmakers have attempted several reform efforts over the years, from tort reform to single payer plans, but most have been frustrated because of partisan divides and lobbying by insurance companies and other companies with interest in this matter. Regulation Overall, group health insurance coverage, and indeed, all health insurance coverage, is subject to state and federal regulation. When employers offer group health insurance coverage, their coverage comes under a couple of federal laws regulating employer-provided health insurance plans. For instance, the Health Insurance Portability and Accountability Act regulates the portability of insurance between one employer health insurance plan and another. HIPAA prohibits one group health plan from denying coverage to an employee coming over from another plan. The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, allows employees who have lost their jobs to keep their health coverage if they keep paying for it. Employers are allowed to require former employees using COBRA to pay the full cost of their health insurance coverage. Also, COBRA only applies to companies that employ 20 or more people. Group health insurance is a vital employment issue to both companies and employees, as health coverage is a key benefit used in the recruitment and retention of employees. As health care costs continue to rise, some employees are willing to take lower paying jobs if the company offers good benefits. Companies that have limited payroll resources but access to a good health plan can take advantage of this to maximize their recruitment and retention potential.

 

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